Every month, the jobs report is reduced to two numbers: how many jobs the economy added and whether the unemployment rate went up or down.
If payrolls rise and unemployment falls, the labor market is declared strong. If unemployment rises, it is declared weak. That shorthand is simple, but it is also incomplete. And right now, it is obscuring one of the most important signals in the U.S. economy.
A falling unemployment rate can mean two very different things
The unemployment rate can fall for two very different reasons. It can fall because people who were unemployed found jobs. That is recovery. Or it can fall because people stopped being counted as unemployed after leaving the labor force. That is not recovery. That is statistical exclusion.
The July jobs data shows why the distinction matters.
